Good afternoon. My name is Christine, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Alpha And Omega Semiconductor Fiscal Year And Q4 2019 Conference Call. All lines have been placed on mute Thank you. So Yongdong, Investor Relations, you may begin your conference.
Good afternoon, everyone, and welcome to Alpha And Omega Semiconductor's conference call to discuss fiscal 2019 fourth quarter year end financial results. I am Soehanjiang, Investor Relations representative for the company. With me today are Doctor. Mike Chang, our CEO Yifan Liang, our CFO and Steven Chang, our Senior VP of Marketing. This call is being recorded and broadcasted live over the web and can be accessed for 7 days following the call via the link in the Investor Relations section of our website at www.aosmd.com.
Yifan will begin with a review of financial results for the fourth quarter fiscal year. Then Mike will review the business highlights followed by Steven, who will provide a detailed segment report. After that, Ivan will conclude with guidance for the next quarter. Then we'll have the questions and answer sessions. The earnings release was distributed by Business Wire today, August 7th 2019 after the close of market.
The release is also posted on the company's website. Our earnings release and this presentation include certain non GAAP financial measures. We use non GAAP measures because we they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures that we provide. A reconciliation of these non GAAP measures to comparable GAAP measures is included in our earnings release. We remind you that during the course of the conference call, will make certain forward looking statements, including discussion of business outlook and financial projections.
These forward looking statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from such expectations. For more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We assume no obligations to update information provided in today's call. Now, I'll turn the call over to our CFO, Yifan, to provide an overview of the 4th fiscal quarter and the fiscal year 2019 financial results. Juan?
Thank you, Sohya. Good afternoon, everyone, and thank you for joining us. Revenue for the June quarter was $111,900,000, up 2.6% when compared to the prior quarter. And up 1.8% from the same quarter last year. In terms of product mix, modified revenue was $96,400,000, up 7.1% sequentially and up 7.8% year over year.
Power IC revenue was $13,800,000, down 21.8% from the prior quarter and down 21.4 percent from a year ago. Assembly service revenue was $1,700,000, as compared to $1,600,000 for the prior quarter $3,000,000 for the same quarter last year. Regarding the segment mix, computer represented 44% of the total revenue, consumer, 18.7%, our supply and industrial, 20.5% communications, 15.3% and service 1.5%. For the fiscal year 2019, revenue was $450,900,000, up 7% year over year. Non GAAP gross margin for the June quarter was 27.4% as compared to 27% for the prior quarter and for the same quarter last year.
The quarter over quarter increase in non GAAP gross margin was mainly driven by the improved product mix. Non GAAP gross margin excluded $400,000 share based compensation charge for the June quarter as compared to $500,000 for the prior quarter and for the same quarter last year. Non GAAP gross margin also excluded $2,600,000 of production ramp up costs related to the Chongqing joint venture for the June quarter as compared to $3,400,000 for the prior quarter. For the fiscal year 2019, non GAAP gross margin was 28.4 percent as compared to 26.9 percent for the last fiscal year, representing an increase of 150 basis points, driven mainly by the improved product mix. Non GAAP operating expenses for the June quarter were $22,600,000 compared to $23,200,000 for the prior quarter $21,800,000 for the same quarter last year.
The quarter over quarter decrease in non GAAP operating expenses was primarily due to Non GAAP operating expenses excluded $2,100,000 of share based compensation charge as compared to $2,600,000 for the prior quarter Non GAAP operating expenses also excluded $3,900,000 of pre production expenses related to our JV company as compared to $3,600,000 in the prior quarter and $5,000,000 for the same quarter last year. Both GAAP and non GAAP operating expenses included $2,300,000 of digital power controller team expenses for the quarter as compared to $2,300,000 for the prior quarter $1,300,000 for the same quarter last year. Our digital power controller team continues to engage with customers in product designs and is making steady progress toward our product roadmap. Non GAAP operating expenses for the fiscal year 2019 were $95,300,000 compared to $86,000,000 for the prior fiscal quarter. Fiscal year.
Non GAAP operating expenses excluded $11,200,000 of share based compensation charge and $15,800,000 of pre production expenses related to our JV company in the current fiscal year. As compared to $9,800,000 of share based compensation charge and $7,800,000 pre production expenses in the prior fiscal year. Income tax benefits for the quarter were $600,000 as compared to tax expense of $600,000 for the prior quarter and $700,000 for the same quarter last year. The tax expense for the quarter was offset by the benefits of This included a $300,000 benefit from the true up of subsidiary tax provisions to the actual tax returns. We also had a $800,000 benefit from electing the IRS directive method for the R and D credit.
Income tax expense for the fiscal year was $1,300,000. Income tax expense for last fiscal year was $700,000, which included $2,700,000 of one time tax benefit from the impact of the US tax reform. Non GAAP EPS attributable to AOS for the quarter was $3.5 per share as compared to $0.22 earnings per share for the prior quarter and $0.31 earnings per share for the same quarter last year. Non GAAP EPS attributable to AOS for the fiscal year was $1.23 as compared to 1.04 earnings per share for the prior fiscal year. AOS continued to generate positive operating cash flow In the June quarter, we generated $15,200,000 operating cash flow attributable to AOS, as compared to $9,500,000 for the prior quarter $8,700,000 for the same quarter last year.
Cash flow used in operations attributable to our JV company was $6,900,000 for the June quarter compared to $17,500,000 Cash flow from operations attributable to AOS for the fiscal year was $65,300,000 as compared to $36,900,000 JV company was $33,900,000 for the year compared to $33,400,000 for the prior fiscal year. Consolidated EBITDAS for the June quarter was $14,200,000 compared to $11,800,000 for the prior quarter and $12,800,000 EBITDA's attributable to AOS for the quarter was $15,100,000 as compared to 13 point $5,000,000 Consolidated EBITDAs for the full fiscal year was $55,000,000 as compared to 56 point $1,000,000 in the fiscal year 2018. EBITDA attributable to AOS for the year was $61,000,000 as compared to $58,400,000 a year ago. Now let's look at the balance sheet. We completed June quarters with cash and cash equivalents balance of $121,900,000 including $100,700,000 at AOS and $21,200,000 at our JV company.
This compares to $139,100,000 at the end of last quarter, which included $90,900,000 at AOS and $48,200,000 at the JV company. Our cash balance a $2,000,000 at AOS and $43,300,000 at the JV company. The bank borrowing balance at the end of the June quarter was $140,900,000, including $41,000,000 at AAOS, and $99,900,000 at the JV company. During the June quarter, AOS paid down $2,100,000 of loans and our JV company paid down $1,700,000 of its financing lease. During the fiscal year 2019, AOS borrowed a total of $21,700,000 of loans and repaid $11,500,000.
The JV company borrowed a total $45,800,000 and repaid $3,500,000. Net fleet receivables were $24,300,000 as compared to $28,400,000 at the end of last quarter and 33 $800,000 for the same quarter last year. Day sales outstanding for the quarter was 24 days compared to 23 days in up from $107,900,000 last quarter and from $90,200,000 in the prior year. Average days in inventory were 117 days for the quarter as compared to 114 days in the prior quarter. Net property, plant and equipment was $409,700,000 as compared to $391,600,000 last quarter and $331,700,000 last year.
Capital expenditures were $22,100,000 for the quarter, including $4,600,000 at AAOS, and $17,500,000 at the JV company. Capital expenditures for the fiscal year were $112,100,000, including $36,000,000 for AOS and $76,100,000 for the JV company. Before I turn the call over to Mike, I would like to share the progress During the June quarter, assembly and test production continue to ramp and 12 inches fabs product sampling and customer qualification process went well. In July, the 12 inches fab started small mass production. We expect to continue to ramp up phase 1 in the next 12 months or so.
With that, now I would like to turn the call over to our CEO, Doctor. Mike Chang, who will provide the business highlights for the quarter. Mike?
Thanks, Yifan, and good afternoon to everyone. Our team asked you to well and delivered a sound quarter Revenue of approximately $104,000,000 was consistent with our guidance and represents 14th consecutive quarter of year over year growth. Non GAAP earnings per share of $0.35 exceeded the high end of the implied guidance range, due to effective cost controls and one time tax adjustments. AOS core business generated healthy operating cash flow of $15,000,000 and a free cash flow of $10,000,000. In addition to solid financial results, We made good operational progress in the quarter.
Shipment grew rapidly for our new products in mobile and home appliance applications. Meanwhile, we optimize the production and inventory in order to manage the dynamics of several new products, including 600 volt and 700 volt, Office 5 Super Junction most families in Turbines Technologies from our Chongqing joint venture. We finished the fiscal year 2019 with healthy top and bottom line growth. Another record year on top of a very strong 2018. This was encouraging considering the backdrop of escalating trade tension, economic uncertainty under the CPU shortage.
Our results clearly demonstrated strengths of our business strategy, operating excellency as well as our diversified product portfolio and expanded customer base. Looking ahead, despite the challenges of current market conditions, and the dual political environment, we are making solid progress toward our calendar year 2021 target of $600,000,000 in annual revenue. Our customer design pipeline is robust. And the design wins are strong, especially in our focus applications. This drives a healthy level of press bookings and solid backlog.
As I mentioned on our last call, with some of the multi year growth drivers beginning to ramp. We believe that we are well positioned to achieve sustainable and scalable growth. Additionally, we are extending our leadership as a top tier supplier in the broad range of applications, particularly in mobile and home appliance. We expect this ongoing diversification to further strengthen in the coming quarters as we ramp production for multiple global brand OEM customers in China, Korea, and the United States. With a solid foundation of customer demand, The production ramp of Chongqing Joint Venture is well timed.
In July, we initiated production at the top inch fab and we are gradually ramping according to our plan. Around this time next year, we expect to be approaching our our long term business strategy with focus and dedication. We believe the success of our new product initiatives, diversification in product portfolio and customer base, as well as this brand and timely investment in capacity over the past several years We'll further prepare our growth. And now I will turn the call over to Steven for a detailed segment report. Steven?
Thank you, Mike, and good afternoon. Let me start with computing. It represented 44% of our total revenue in the June quarter. Revenue was down 5.1% sequentially and up 2.3% year over year. As I mentioned on our last call, we prioritized our production plan for commercial PC which received a higher allocation amid the ongoing CPU shortage.
With both So to support our computing customers, we were able to allocate more capacity to other high growth areas that already started ramping in Our computing segment remains an important component of our business as a market leader and strategic partner to leading PC OEMs and ODMs, we continue to work closely with our customers to provide innovative products and superior customer support. In the September quarter, while we anticipate strong sell through, our sell in revenue is expected to be down mid single digits as we continue to manage the computing inventory. Now let's discuss the Consumer segment, which was 18.7% of total revenue in the June quarter. Revenue increased strong growth in home appliance offset softness in other consumer applications in the June quarter. The new design wins we announced last quarter in home appliances with Chinese and Korean customers further ramped during the June quarter.
Our home appliance customers value the reliability and energy savings that our IGBT technology offers through better efficiency, robustness and smaller size. We are encouraged by the fast adoption of our technology at global OEM customers, and we will continue to sharpen our technology to gain greater share and add more content. We are on track to increase Looking to the September quarter, we expect a modest growth in the overall consumer segment led by continued expansion of our home appliance business as well as seasonal This segment accounted for 20.5 percent of total revenue, up 8.1% sequentially and up 3.7% year over year. While our ACDC power supply business remains soft, our quick charger business rapidly grew as it further expanded to add top smartphone customers. Overall quick charger adoption has grown in recent years as battery capacity has increased in order to meet the ever increasing power requirements of demanding smartphone applications.
This trend requires high performance and medium voltage MOSFETs and this bodes well for AOS as our June quarter's quick charger revenue more than doubled from the same we expect a strong the Communications segment, which was 15.3 percent of revenue in the quarter, up 25.4 percent sequentially and up 10.4% year over year. The growth was driven mainly by the rising demand for battery protection products at our smartphone customers. As mentioned before, smartphone battery capacity is increasing and requires higher efficiency to prolong battery life. Our expertise in low voltage Mospot technology coupled with advanced chip scale packaging allows us to deliver compact high power density products that protect the latest generation of smartphone batteries. Looking into the September quarter, we anticipate another double digit growth in this segment as all major smartphone players in China, Korea, and the US are entering peak production.
With that, I will now turn the call over to Yifan for the guidance.
As we look forward to the first quarter of fiscal year 2020, we expect revenue to be between $115,000,000 $119,000,000. Gross margin to be approximately 20%, plus or minus 1%. Non GAAP gross margin is expected to be approximately 27.3 percent plus or minus 1 percent. Note that non GAAP gross margin excludes $500,000 of estimated share based compensation and $8,100,000 of estimated production ramp up costs relating to the Chongqing Joint Venture as the 12 inches fab starts production in July 2019. Operating expenses to be in the range of $27,000,000 plus or -1000000 dollars.
Non GAAP operating expenses are expected to be in the range of $24,600,000, plus or minus $1,000,000. Both GAAP and non GAAP operating expenses include $2,900,000 to $3,100,000 of estimated expenses relating to the development of our digital power controller business. Non GAAP operating expenses exclude estimated share based compensation charge of approximately $2,400,000 taxi expense to be approximately $500,000 to $700,000. Loss attributable to non controlling interest to be around $5,400,000, on a non GAAP basis, excluding estimated production ramp up costs relating to the JV company, this item is expected to be approximately $900,000. As part of our normal practice, we're not assuming any obligations to update this information.
With that, we will open up the floor for questioning. Operator?
Your first question comes from the line of Jeremy Kwan from Stifel. Your line is open.
Yes. Thank you. And, congratulations on the the strong communications ramp. It's nice to see that coming on. Mike, just a question on the calendar 21, $600,000,000 target.
You mentioned something about, hitting the that run rate in the June 2020 quarter. Did I hear that correctly?
Yes.
Okay. And can you give us maybe more color in terms of how you see that ramping? Are these basically design wins that you already have, already won, and it's it's just a matter of ramping up the fab to meet that demand? Or are there some other things that needed to take place between now and then?
Jeremy, this is if I want to correct, then a little bit on the, comments regarding the June quarter 2020 run rate of $600,000,000 target. What we said in our prepared remark is by the close to the June quarter of 20 20 June quarter, we will, approaching the target run rate of Chongqing joint ventures, phase 1 12 inches fab, so not the $600,000,000 run rate.
Okay. So on a quarterly basis, what would that work out to then for the June quarter? Is it, I'm just trying to get a sense of what was meant by that?
Well, that means approaching to the target run rate. So on the
one closing, is the capacity run rate. Yes.
Got it. Okay. And that's for phase 1.
Yes. I think for the phase of your question is for 2021 calendar year, right? The $600,000,000? Okay.
Yes. That's a
very good question. First, thank you for the question. Okay. No, we have to prepare everything. The first, we make sure our technology and new product platform is toward the direction.
Of course, we need our capacity ready for that. So it's everywhere to fulfill their goal. It's not just that one place there. Okay. You missed one place then you'd be in trouble.
So we actually work at everything there from the technology, from the manufacturing, even from our marketing sales, the whole company, a gear for that. Got
it. That's very helpful. I guess if we look at the, the JV ramp itself, Can you give us a sense of where the it looks like the operating cash flow is improving each quarter. Is there do you do you have an internal projection for where it might turn to breakeven? I also remember you mentioning the need for maybe working capital loan last quarter.
Is that something also stowing the plans and how much that might be?
Okay, sure, Jeremy. Yes, when still under negotiation for working capital loans, so at this point. So we'll see. At this point, yes, joint venture still has cash balance right now, to support their ramp. In terms of cash flow breakeven.
When we ramp up to the phase 1 stage, I would expecting at that time, we can be a cash flow neutral at the joint venture.
Great. Thank you. And maybe just one final question before I give up to the queue. It looks like the OpEx or sorry, the OpEx has been pretty nicely controlled the last few quarters. Is this the September quarter guidance, it's up a little bit.
Is that the new run rate that we can expect, for fiscal 2021 or sorry, for fiscal 2020?
Yes, I would think that you can use that as a reference, because in the last couple of quarters and those are in OpEx and kind of maintained at a relatively, lower than normal level because of the fluctuation of those R and D expenses and other on the operating expenses. I mean, this thing is when we look forward to the September quarter, we expect run some engineering expenses up. Great.
Thank you very much.
Jeremy, before you hang up, can I just get a little bit above for your first question? Because in this be pretty big there because it's so complicated, right? But actually, okay, on top of what we talked about, the technology portfolio and put online there, And even more important is that the customers start to recognize AOS as a brand name. So right now, our design in, our engagement with the Tier 1 customer is really capable of towards the direction. So everywhere is on that direction.
That's why we are confident to to say that we are pushing that direction.
Your next question comes from the line of David Williams from Loop Capital. Your line is open.
Thanks for taking my question. Congrats on the the the solid finish to the year and the progress is being made. First of all,
I just wanted to see if you
could maybe give us an update or maybe your thoughts on channel inventory health. And and if you're seeing anything, concerned there. It sounds like a a lot of those areas, are seeing some nice digestion of the, the the overstock Are you seeing that and any concerns, I guess, any particular areas of of weakness or, of maybe too much inventory that, remains?
Sure, David. There are quite a bit of dynamics in that area. And I mean, this overall our channel inventory is healthy within our target of 2 to 3 months. I mean, this right now, in the June quarter or even including the quarter before, we have been on optimizing our productions and internal inventory and channel inventory to manage the dynamics of computing and smartphone business. So, we manage our productions to support our customer demand.
Our overall goal is to support, our customer demand according to their production schedules. So in the some different customers and they have different ramping schedules. So we have to manage that. Also, recent market conditions and trade tensions. I mean, those things complicated these whole things.
There have been more pull ins and push outs and I mean, adjustment. So then I mean, this whole thing is, we have to manage it intelligently. Right now, when using our inventory to support our portion of the customers and then ramp our productions to support the other than a little bit more on other customers ramp up in the June quarter September. Quarter. So it's quite dynamic.
But then overall with an additional capacity came online at our Tongqing Joint Venture, we expect our supply constrained situation gradually ease. But like what Mac said, it will take some time to full customers to go through those qualifications, designing in, design win and their production ramp up. So, right now, what kind of a diligently managing those situations. But overall, our channel inventory is very healthy.
Okay. Very good. Thank you. And I realized that you guys have a little different dynamic what's really driving your business today. But if you're kind of looking out at China overall.
How do you see that demand environment today? And what are you hearing maybe from your customers in terms of their view? Is are they becoming more cautious? Are they each thing a bit. What do you think, I I guess, are your customers, are they are the order trends as you would expect, or do you think there's anything that's really being pulled in ahead of, maybe, concern for tariffs or further trade issues?
Yeah, definitely. I mean, there are then a lot of moving parts and dynamics in those areas. I mean, this thing is depending on the which way the tweet tension goes. And I mean, then if tomorrow, if there's another tweet, people may may react differently. And then I mean, that's the, situation at this point.
I mean, yes, we do see some on who is ahead of whatever the trade tension situation. And we also see some adjustment pushing out. And this is quite dynamic, I would say, at this point.
Okay. Very good. Thank you. And then maybe in in terms of the server demand, is there anything there that seeing softness weakness or maybe any progress that's being made, just any color you can give on the server side would be helpful.
Sure. And I think you're asking about regarding our digital power initiative. So regarding that space, and and we're we're still on track, our next target. And right now, we're in the we're getting final products out of development. And we are already engaging with customers.
Right now, we're treating right now this current year as a design in phase. Our model along has been to chase and target meaningful revenue in 2020. And on that regard, we believe we are on track.
Okay. Just any sense on
the magnitude of that revenue contribution next year?
If 5 to 10 is what we've been seeing.
Okay, very
good. Well, thanks so much. Yes, let me just add a little bit you know, this area, the business will be, normally, people are very careful to design and design you in. And it takes some time to grow, but once grow will be very solid because there's a lot of a lot of strong adhesion in this business there. So we are pretty excited about that.
Thank you.
Thank you.
Your next question comes from the line of Craig Ellis from B. Riley FBR. Your line is open.
Hey guys, it's Carlin on for Craig. Thanks for taking my question and congratulations on the good results in the quarter. I just had a quick question and I apologize because I think I might have missed it. But regarding the compute, September quarter guidance, How has the, obviously, tariffs have, made things more dynamic, but how has the CPU supply ramp and, this latest round of tariffs impacted what would be a normal seasonal ramp through the back half of the year?
What we've seen overall in the CPU situation, overall as an industry, it has been getting to ease up in terms of the shortage. We see both the 2 majors chip makers combined are catching up their supply to the demand. So we saw that already happening in the second quarter. Of course, with the use of trade tensions and the threat of additional tariffs, that happened back in Q2 and it's happening now also in the September quarter. So there is some dynamic to that in terms of some cost rumors if they are able to pull in production for that.
But overall, I think what we've guided is that because we have some inventory in the computing area, and we've also allocated, we've had to allocate our capacity to support other growing business, especially in the communications and quick charger area, we are expecting for computing our sell through to be higher than our sell in the September quarter.
Okay. So just to clarify, what the actual guidance was for the September quarter? Does that mean it was going to be down sequentially or, kind of up sequentially?
It will be down sequentially for sell in.
Got it. And then if I could ask a follow-up. So I think last quarter, and feel free to correct me if I'm wrong. You had said that the digital power, initiatives would be at the joint venture would be ramping kind of closer to the March quarter of last year, but now it seems as though you guys said June quarter, did I have that wrong, or did something change in the way you're thinking about how that business is ramping through this through this year?
1st of all, digital power not, not in the joint venture. I mean, that's the first thing. Second thing is regarding the joint ventures ramp up, yes, I mean, there's a talking to fab started the small mass production in July. As I said previously, we expect and we've ramped this fab in the 12 month period also. So I mean, that's pretty much in the lead to same time next year.
So we're targeting to get to the phase 1 ramp up.
Okay. And one more from me, and then I'll hop back in the queue. Once we get to that that kind of joint venture full capacity in the June quarter. How do we expect, gross margins to track towards that 30% target moving forward? Will it be kind of by the June quarter, we would expect upward pressure towards 29 30 percent, because of the new product coming online, or is that going to be by more end of calendar 20 calendar 20.
Just any color you can give around how you're thinking about, gross margins tracking towards the target?
Okay. First of all, what we said was we're targeting 1, 12 inches fab run rate in about 12 months or so. So that translate to September quarter of next year, kind of the year. 2nd thing is, it's we'll wait estimate. And when we ramp up the phase 1 12 inches fab, our 12 inches wafer cost on a per diode basis will be on par with our 8 inches wafer cost.
So that's the neutralized cost impact at that time. So our overall target model is to target the 30% margin when we get to $600,000,000 in revenue. So that's how target model in calendar year 2021.
Your next question comes from the line of Jeremy Kwan from Stifel.
Yes. Thank you. Maybe just a follow-up on that previous question. So understanding that, you know, that 30% is the overall target model at 600,000,000. How about in terms of the progression between now and then from what I understand, the, as the JV ramps up, there's actually a little bit of a negative impact to gross margin and it looks like we saw a little bit of that in the September quarter.
Is that 27% 27.3%, is that kind of a baseline that it might where can we see gross margin trend? I guess in the next 12 months as the JV ramps.
I would expect in the recent couple of quarters and it's in the state in that neighborhood 27 28. And I would expect that gradually will get up to 28 29 range. So that's the that's the primarily from the new products and all those product mix along with it. So another factor is this year and onward will factor in some ASP pressures because the system right now, the market dynamic is different than last year's space. So last year's shortage and has been easing up and so on.
Right now, I would build in some modest to ASP erosion.
And is that a change from maybe 3 or 6 months ago where we I think you mentioned ASPs kind of stabilizing versus, you know, being kind of, having some uplift last year. Is the modest ASP erosion? Is that a little bit of a shift there? Is it something?
A little bit modest shift.
Okay. And maybe, maybe switching gears a little bit to the CapEx side of things. With the fiscal year behind us, can you give us an update on your CapEx plans both for AOS internal and then the JV for fiscal 2020?
For fiscal 2020, AOS side, it wasn't targeting, like, still 6% to 8% of revenue type of things. I would think that right now it's more toward low end of that range. So for AOS. For the JV, yet they will continue to spend some remaining portion of the phase 1 equipment purchase payment. And mainly payment and then equipments are pretty much all in.
So, we're fine tune some production lines and we may need here and there primarily is the one remaining payment. So once we have the current cash plus loans that were under negotiation, we would expect and that will be sufficient for the phase 1 ramp up.
Great. That's very helpful. And one last question, in terms of the overall end market mix, you've got communications ramping up, you know, quite strongly last quarter. It looks like it's going to be strong again this quarter. And then power supply industrials doing pretty nicely too.
Do you
see an overall shift in, the end market mix in 12 months? And and if so, is it significant enough to shift your seasonality from think right now you guys have your fiscal Q2 and Q3 a little bit on this more flattish to downish a little bit and stronger periods being fiscal Q1 and Q4. Do you see that holding true or there's as your JV ramps or there are different things to consider in terms of seasonality?
I think in the short term, it probably won't change too much. In the longer term, we are moving towards diversifying our segment base in the past, we've been more computing heavy. Of course, we'll continue to invest and grow our computing business. But right now, we are seeing our other segments grow faster right now tied to the smartphone, whether it's battery protection in the communications or a quick charger in the power supply. Some of these can help to smooth out the seasonality a bit.
But I think overall, we're still going to see some seasonal pattern, just like we have in the past.
Great. Thank you very much.
But in general, we also is our goal to diversify our technology into all the area of greater growth. And so that's our company's strategy and policy.
Thank you, Mike. I appreciate that.
You're welcome.
Your next question comes from the line of Craig Ellis from B. Riley FBR. Your line is open.
Hey guys. Just a quick follow-up. So, free cash flow in the quarter was, for AOSL was strong. And I'm just trying to think about how, what the plans are for free cash flow kind of moving through calendar 2020 calendar 2021 once phase 1, of the joint venture ramp kind of gets more meaningfully behind you guys. How do you guys think about free cash flow usage?
And then also, is there anything that you guys need to do to prep for phase 2 and phase 3 to kind of track towards the calendar 24 target financial model of $1,000,000,000.
Okay, sure. Overall, I mean, this fiscal year 2019, A. Wesson, generated the healthy free cash flows. Going forward, fiscal year 2020, I would expect them, we can do similar level of free cash flow depending on the cash flow needs and I would not expect too much too heavy CapEx investment from the iOS side. We're now in a more like maintaining and fine tune our product mix production lines on the bottlenecking some areas.
So for AOS alone, I would expect to continue to generate healthy operating free. Cash flow. For the joint venture, I mean, that for them, we are a separate entity. Other than the contributions, we have made and joint venture company has its own capacity to borrow money and they own the land and the buildings and the equipment, they can mortgage it out and then get financing from there to support their ramp. So for AWS, they are one of our major suppliers in that way.
So for the joint venture for phase 2, 3, I mean, that's, when we ramp up, I would say halfway through phase 1 and then we'll start considering phase 2. I mean, the for phase 2, I mean, the incremental investment will be much less than phase 1 because the some infrastructures and the buildings and all those things, CapEx are down. So overall, we just need to purchase some equipment tools and then maybe the small incremental, cleanroom expansions. So requirements and we'll think about it when we, next year sometime.
Got it. Got it. And then, I just want to hop back really quickly to the communications segment, really strong performance. As next year, comes around and, you know, 5g Handsets, can start to a more meaningful rollout. How would we expect, how should we think about your content increases on the battery protection side?
In that business and how much was this year's kind of banner performance more customer diversification? And rather than kind of unit dependence because, you know, obviously, units are not having a great year. So what's the potential, like, upside next year to what was a really strong quarter this quarter and is shaping up to be a really strong quarter next year next quarter, sorry.
Sure. For us, just looking at the application first, the 5G would definitely drive more content. And with regards to battery protection, which is where we play, right now, you can see the latest smartphones not only are they getting bigger, but especially with the 5G, it's much more demanding on power. And with 5G, you have, you know, additional capability for video streaming or gaming or even virtual reality, that's very taxing on the battery itself. So the need for efficient battery protection because it's very keen.
And, and so definitely on, so on the client side, we expect to see growth. The growth that we saw this year, is a has a lot to do with the customer expansion. We added, as we shared with you guys, we added the major global smartphone makers at the end of last year. And this year, we're beginning to enjoy that. That will continue.
We expect that to continue going into next year on the client side. And the area for growth for us is also going to be on the infrastructure side with telecom. So 5G, not only is going to benefit handsets, but all the infrastructure will have to be replaced and over the course of the next few years. And AOS has strong products and covering a wide variety of applications within the telecom system. This includes discrete MOSFETs that go into the DCDC conversion as well as our digital power solutions for telecom for the point of load.
So on AOS, we believe we have a very good opportunity to grow even further beyond just client side battery protection, but moving also into the infrastructure side.
Got it. And do you know like what the have do you guys have any sense on what perhaps maybe your long term mix would be in terms of smartphones versus telecom in that in that end market is, you know, is it going to be eventually fifty-fifty? Is it going to be 7525? I'm just trying to think about, because I know it's so small right now, and how that's going to ramp, once you start really kind of getting that business underway?
I think fiftyfifty and and and the midterm is probably about right. Obviously, the battery protection has a big head start in that market. But the digital power, is, you know, is something that's much more longer, sustaining. It's the the con not a content going into base stations is quite large for digital power as well too. So in the longer run, I believe the digital power can catch up to the battery protection portion of the client side.
Got it. All right. Thanks guys.
There are no further questions at this time. I turn the call back over to the management team.
This concludes our earnings call today. Thank you for your interest in AOS and we look forward to talking with you again next quarter. Thank you. Thank you.